China Oilfield Services (COSL): Undervalued Offshore Giant with 2025 Re-Rating Potential

How COSL’s Utilisation Rebound and Clean Balance Sheet Set the Stage for 2025

Good Evening,

We’re back in our happy place - looking for undervalued Chinese equities, after taking a fun trip to Indonesia.

We’ve been quietly following China Oilfield Services (COSL, $2883.HK) for a while now — watching margins recover, rigs redeploy, and the balance sheet steadily de-lever. At times, it felt like the story was moving at glacial speed (or stuck in the South China Sea typhoon belt), but things are clicking into place. This is our deep dive on what we think is one of the more interesting offshore names in the China equity space.

As with most good ideas, this one took time. There was scope creep, too many spreadsheets, and a brief detour into North Sea rig dayrates — but we’re glad to have pulled it together. If you’re interested in Chinese SOEs, offshore oil cycles, or just cheap cyclicals with real earnings, we think you’ll enjoy it.

This piece stands alone, but builds naturally on our earlier work on Chinese upstream capex trends and the domestic energy push, all covered in past Panda Perspectives posts (which you can find in the archive), and an update to that is coming soon, potentially even next week.

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Let’s get into it.

COSL in the China Oil & Gas Landscape

China Oilfield Services Limited (COSL) is the core oilfield services arm of the China National Offshore Oil Corporation (CNOOC) group, dedicated to supporting CNOOC’s offshore oil and gas operations. CNOOC is one of China’s “big three” national oil companies (alongside CNPC/PetroChina and Sinopec), focusing on offshore exploration and production . Within this structure, CNOOC Limited (listed in HK/Shanghai) handles the upstream E&P activities, while COSL provides the essential oilfield services – from well drilling to geophysical surveying . In fact, COSL, as CNOOC’s main offshore service provider, delivers almost all the necessary drilling rigs, seismic vessels, and well services for its parent. Fitch Ratings notes that COSL supplies 92% of CNOOC’s drilling platforms, 100% of its seismic survey ships and wireline logging, and the majority of its offshore support vessels . This makes COSL an integral part of China’s offshore energy ecosystem and an indispensable ally in CNOOC’s drive to exploit offshore reserves.

COSL’s strategic function can be contrasted with that of another CNOOC affiliate, China Offshore Oil Engineering Company (COOEC). While COSL focuses on operational services (drilling, well completion, marine support, etc.), COOEC serves as CNOOC’s engineering and construction arm, building the offshore platforms, subsea pipelines, and infrastructure for oilfield development . In practice, the two work hand-in-hand: for example, COSL often commissions new rigs and vessels from COOEC’s shipyards, effectively keeping fabrication in-house . COOEC’s expertise lies in large-scale project engineering (designing and installing production facilities), whereas COSL specializes in the day-to-day exploration and drilling services. A simplified group tree would place COSL and COOEC side-by-side under the CNOOC umbrella – COSL servicing wells and drilling operations, and COOEC delivering the construction of rigs and platforms – both ultimately enabling CNOOC Limited’s upstream production.

Within China’s energy service landscape, COSL is uniquely positioned as the dominant offshore services provider. It controls over 90% of China’s offshore drilling market , essentially monopolizing services for CNOOC’s domestic projects. By covering the full chain of offshore exploration and production support, COSL reduces CNOOC’s reliance on foreign oilfield service companies. This aligns with China’s strategy of energy security: as offshore exploration pushes into deeper and more challenging waters, having a capable domestic service company is a strategic asset. COSL’s fleet of rigs and seismic vessels have even ventured into sensitive areas (such as the South China Sea), underscoring its role in advancing national offshore ambitions . Beyond serving CNOOC, COSL has gradually extended services to other clients (e.g. overseas national oil companies and majors), projecting Chinese offshore expertise globally. In summary, COSL is to CNOOC what Halliburton or Schlumberger are to international oil companies – the go-to provider of crucial drilling and well services – but with the added strategic importance of being state-controlled and integrated into China’s offshore growth plans.

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